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Rethinking “Good Debt”: Mortgages, Student Loans and the Growing Financial Strain
By Drooid · · How we work
Core Event – The Rise of Debt Labeled “Good” That Becomes Burdensome
Mortgages and student loans are marketed as “good debt” because they can fund appreciating assets or increase earning power. Recent reporting shows many borrowers now see these obligations eroding savings and delaying other wealth-building goals. Homebuyer Bryanna Hambrick bought a Columbus, Ohio, house in 2022 expecting to save on rent, yet a higher-than-expected interest rate and a property-tax reassessment pushed her monthly payment to nearly $1,200—about $200 above her budget. At the same time, student-loan balances average $40,768, with 9.3 million borrowers in default as of June 30.
Background & Context – From “All Debt Bad” to a “Good Debt” Narrative
In the 1920s debt was seen as profligate. Post-World-War II installment credit for cars and radios became “democratic,” and mortgages were celebrated as a path to homeownership. The 2008 crisis showed how subprime mortgages could collapse; the Federal Reserve Bank of Chicago recorded about 3.8 million foreclosures between 2007 and 2010. The “good debt” label persisted, extending to student loans, even as tuition rose from $14,550 (inflation-adjusted 1971-72) to $45,000 by 2025-26.
Data & Statistics – The Scale of the Issue
- Foreclosures: ~3.8 million homes lost 2007-2010 (Fed. Reserve, Chicago).
- Student-loan debt: >42 million borrowers; total outstanding >$1.7 trillion.
- Average balance: $40,768; 3.8 million borrowers owe >$100,000.
- Default rate: 9.3 million federal borrowers in default as of June 30, up from 6.2 million in 2016 (U.S. Education Dept.).
On-the-Ground Reports – Personal Experiences Highlight Systemic Risks
Hambrick’s story shows how a “good” mortgage can become a paycheck-to-paycheck burden when taxes rise. Richard Bares, who expected Public Service Loan Forgiveness to clear his debt, learned the Education Department retroactively removed qualifying payments, extending his repayment horizon by two years. He described the experience as “sick to my stomach.”
Official Statements & Responses – Expert Guidance on Evaluating Debt
Former FDIC chair Sheila Bair advises borrowers to question the “good debt” label, emphasizing that debt is a burden on financial futures and urging affordability checks before committing. Financial advisor Klontz treats debt as a business decision, warning against over-optimistic income assumptions. Roosevelt Institute economist Michael Madowitz notes that AI-driven hiring changes have weakened the “security” a degree once provided, making education returns less certain.
Why It Matters – Implications for Wealth Building and Economic Mobility
When mortgage or student-loan payments consume a large share of income, borrowers delay home purchases, retirement savings, and other investments, slowing wealth accumulation across the middle class. The growing default pool also raises systemic risk for lenders and the broader financial system.